July-Nov period sees massive decline in profits on foreign investments

Pakistan saw a massive dip in the outflow of profits and dividends on foreign investments during the July-Nov period, as the central bank says the total amount was $128.7 million compared to $776 million during the same period last year.

However, the State Bank of Pakistan (SBP) data, on one hand, reflects a positive sign that the country was able to save a sizeable amount of dollars but, on the other, it is a negative signal showing poor economic growth amid less foreign investment.

An earlier set of figures released by the SBP had shown that the country had experienced a massive decline in foreign direct investment (FDI) during the first five months of the fiscal year 2022-23 [FY23].

The FDI had dropped by more than half to $430.1 million in the first five months of FY23 against an amount of $884.9 million recorded for the corresponding period last year.

Similarly, the FDI stood at $81.8 million in November after a 48 percent dip when compared with $158.4 million in the same month in 2022.

Meanwhile, the PBS (Pakistan Bureau of Statistics) data showed that the machinery imports posted a fall of 42.35 percent to $2.76 billion against $4.78 billion.

The trend comes at a time when cash-starved Pakistanis is already grappling with a deprecating rupee, shrinking foreign reserves, high interest rate and an alarming inflation.

It is a vicious circle, resulting in reduced investment domestically as well with little opportunity to enhance tax collection. At the same time, there are fewer job opportunities for people who are already taking hit by unprecedented inflation and reduced purchasing power.

The falling inflows reflect foreigners don’t consider Pakistan an attractive destination for investment at present amid economic and political uncertainty prevailing in the country, which dampens the market sentiment within the country as well for local investors.

Details showed that the highest FDI inflows came from China – $102.5 million compared to $124.9 million in the same period of last year.

China is the biggest trading partner of Pakistan and also its biggest lender. However, poor economic health and a riskier external front of the economy have compelled China to be cautious as well over investing in Pakistan.

However, there has been an increase in the case of the United Arab Emirates which became the second-biggest investor with $81.6 million compared to the previous investment of $62 million during the same period of last year.

Other significant investors were Switzerland and the Netherlands with $58.7 million and $44.3 million respectively.

The sector-wise position showed that the power sector attracted the highest foreign investment of $204 million, as it attracted $160m inflows a year ago.

Inflows in the financial business declined attracted $141 million compared to $205 million last year while oil and gas exploration managed $40 million against the previous level of $93 million.

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